22. Consider a monopolistically competitive market. Despite producing differentiated products, suppose that each existing firm (and any...

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Economics

22. Consider a monopolisticallycompetitive market. Despite producing differentiated products,suppose that each existing firm (and any potential entrant) has thesame total cost function, given by TC=2200+100Q+Q². Anddespite producing differentiated products, suppose that eachexisting firm currently faces the same residual demandcurve, given by Q=(320-P)/4.5 What will happen in the market overthe long run?
Â Â Â Â Â A.Number of firms will increase and residual demand of existing firmswill shift leftward.
Â Â Â Â Â B.Number of firms will decrease and residual demand of remainingfirms will shift rightward.
Â Â Â Â Â C.Number of firms will stay the same and residual demand of existingfirms will not change.
Â Â Â Â Â D.Number of firms will increase and residual demand of existing firmswill shift rightward.
Â Â Â Â Â E.Â Â Number of firms will decrease and residual demand ofremaining firms will shift leftward.

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4.0 Ratings (592 Votes)

For each firm in the given monopolistic competition TC 2200 100Q Q2 Marginal Cost MC ddQ TC ddQ 2200 100Q Q2 0 100 1 2Q 100 2Q Q 320P45 45Q 320 P P 320 45Q See Answer

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